"Generation Buy". Doesn’t quite have the same ring to it. For baby boomers and Generation X, buying a home was taken for granted, and no one calls those cohorts "Generation Buy". But David Cameron seems fond of the phrase and if it means that he’ll stretch every sinew to make it happen, fine.
First time buyer numbers plummeted a decade ago from a peak of 600,000 to 300,000 today, hence the rise of generation rent. Most private renters still want to buy a home, and the government recognises this; George Osborne said before this year’s election that he wants to double the annual number of new home owners.
But the Prime Minister won’t change anything about home ownership with the policy he talked about in his speech to Conservative Party Conference. “Starter homes” are his latest wheeze, following the failure of Help to Buy to revive aspiring home owners’ fortunes. These privately built homes will be sold at a 20% discount to first time buyers. If house prices keep rising at current trends, that means that in 2018, you’ll be able to buy a new-build flat at 2015 prices. Sorry Dave, but I won’t be opening the champagne quite yet.
Before we even get to Wednesday’s announcement, there are a number of concerns around starter homes. Their prices will be capped at £250,000 outside London – affordable only to households with an income of £50,000 or more – and a whopping £450,000 in London, heights accessible to only the very richest. And they really don’t need that much help from the government.
If a fortysomething who has diligently saved all their career for a deposit finally finds they can afford a starter home, well they’re out of luck. These properties are only for the under-40s. If that fortysomething can get a mortgage – a tall order if you have fewer than 25 years until retirement age – why should they be barred from this scheme? It’s strange that Cameron apparently doesn’t care about the aspirations of the 1.3m-plus over-40s in private renting.
And if private developers will be required to sell homes at a discount, they will presumably take all sorts of shortcuts. Kitchens: cramped. Storage space: none. Insulation: just turn up the heat. Starting a family? Forget it.
To his party delegates, Cameron announced triumphantly that these overpriced shoeboxes will now count towards the government’s affordable housing target. Developers won’t have to build low-cost homes for rent any more.
That is chilling. The major problem with the housing market at the moment is that rent is too damn high. People on average incomes can’t put away enough at the end of the month to amass a deposit. People on low incomes can’t even make ends meet. Cutting off the supply of new social housing will increase their dependence on the insecure and unreliable private rented sector. This ultimately hits the taxpayer in the form of higher housing benefit costs.
In his speech, David Cameron promised an “all-out assault on poverty”. Improving routes into work is essential, but work has to pay. One way of putting more money back into people’s pockets is to cut the cost of their housing.
Starter homes don’t do that. Even if 200,000 of them are built and bought by 2020, five million households will remain in private renting, paying an average of half their income to their landlord. The government should be prioritising the building of social housing.
But they argue that by relaxing planning rules, more houses will be built, and that overall supply is the important thing to aim for rather than social housing specifically. But 200,000 not especially affordable homes over five years is not what we need. To have any sort of impact on prices and rents we need at least 200,000 homes every year (300,000 ideally). And the best thing the government can do is build genuinely affordable housing. It could allow city regions to bring in flexible rent controls with a mechanism to raise money for local social housing. It could do something with the £3bn of tenants’ deposits lying uninvested, making no return for their owners.
If more private renters claiming housing benefit can move into new low-cost housing, then demand for private renting will fall, bringing down rents for everyone else, who would be able to save properly for a deposit to buy (or might even decide that private renting isn't so bad after all). And guess what? With the wind taken out of the sails of the buy-to-let market, homes sold at the market price will become affordable.
Not only that: with more social tenants, that’s more theoretical beneficiaries of the government’s baby, Right to Buy. This approach would result in so many more first time buyers than the Starter Homes policy, the government might even hit its target.
At the moment, though, we don’t see any reason to change our name any time soon.
Hear our Director Betsy Dillner talk to Justin Webb on Radio 4's Today Programme on Wednesday morning.